Focus On: Janice R. Bellace

Preventing More Tragedies in Bangladesh

Posted on May 15, 2013

Today, May 15, is the deadline set by IndustriALL Global Union of Geneva, Switzerland, for global retailers that source products from Bangladesh factories to sign an agreement ensuring safety for the country’s workers. The initiative follows a factory building collapse near Dhaka on April 24 that claimed 1,127 lives. The Rana Plaza building housed five garment factories where approximately 3,500 people were employed. 

The dozen large global European and U.S. retailers that have signed on so far account for nearly 1,500 of Bangladesh’s 5,000 garment units. Large retailers like Walmart (which has already blacklisted close to 250 factories it found unsafe) and Gap — both of which source from that country — have stated they will develop their own factory safety plans.

 According to Janice Bellace, Wharton professor of legal studies and business ethics, multiple safety agreements could prove difficult to implement. Edwin Keh, a lecturer in Wharton’s operations and information management department, adds that retailers should slow down their business operations in Bangladesh and more thoroughly study the problems that industries there face. 

Bangladesh is the world’s second largest maker of outsourced garments after China, and its $20 billion garment industry accounts for four-fifths of its total exports. Yet, its four million garment workers earn an average $38 monthly and work in mostly unsafe buildings under deplorable conditions. Government fire safety inspectors recently determined that 943 of the 3,197 factories they visited are risky or substandard. 

Six months before the Rana Plaza tragedy, the International Labor Rights Forum had tried to persuade Western retailers to sign a fire and building safety agreement covering their outsourced factories. PVH, which owns the Calvin Klein and Tommy Hilfiger brands, and Tchibo of Germany signed at the time, but other retailers shied away. In recent days, many others have signed on, including H&M of Sweden, Marks & Spencer, Primark and Tesco of the U.K., Spain’s El Corte Ingles and Italy’s Benetton.

Under the legally enforceable agreement, retailers will finance independent factory safety inspections and mandatory repairs and renovations, make reports public, allow workers a say in safety conditions and stop sourcing from those factories that do not meet specifications.

Walmart’s safety plan, as described in an article in The Wall Street Journal, is one that “is billed as a commitment, but [that] is different from the legally-binding pact meant to prevent disasters” like last month’s building collapse. Wal-Mart’s approach, according to the article, includes hiring an outside auditor to inspect 279 Bangladesh factories and publish its findings by June 1. If violations are found, Walmart said “it will require factory owners to make necessary renovations or risk being removed from its list of authorized factories.” 

Split in the Ranks 

Some other U.S. retailers, including Sears, Macy’s and J.C. Penney, prefer their own safety plans or are undecided about an industry-wide agreement. The National Retail Federation, a trade group based in Washington, D.C., discussed a possible accord among its North American member retailers, according to a Reuters report.

 Multiple agreements would be “a major mistake,” according to Bellace. Small garment firms supply a significant number of retailers and would find it difficult to cope with many different agreements, she says. She advises retailers to form a consortium, create monitoring mechanisms, and hire and train inspectors. She doubts if many companies would have the resources of a large retailer to participate in factory safety agreements. PVH has agreed to contribute $2.5 million for factory safety improvements under the new plan, while Gap has separately promised $22 million for factory improvements.

 “The pact will have little impact unless a substantial percentage of retailers and brands sign on,” Bellace says. “Otherwise, the small garment companies will simply do business with those that are the easiest on them, [as in] not requiring much, and doing ineffective monitoring” or none at all. Scott Nova, executive director of the Washington, D.C.-based Workers Rights Consortium, a labor rights monitoring group backing the agreement, disagrees. “If you have a program on the ground with competent inspectors, it is absolutely possible,” he told Knowledge@Wharton Today. 

A Train Wreck Years in the Making 

Keh, who earlier headed Walmart Global Procurement, likens the Bangladesh tragedy to “a slow moving train wreck that has been years in the making.” His snapshot of the country’s problems: It is poor and agrarian, with underdeveloped infrastructure, an overstretched power grid and an unhelpful legal structure. Fire codes, building safety and working condition rules are inadequately addressed and not always enforced. Corruption is another factor. 

Bangladesh’s problems with factory safety may be the “unintended consequence of good intentions,” says Keh. Its apparel industry grew “too fast for its own good” as the European Union granted Bangladesh favorable duties for its exports. Its low wage levels lured U.S. brands, and rising wages in China helped it get even bigger volumes “as manufacturers chased the lowest needle,” he adds. 

Keh labels the latest safety agreements “stopgap” and calls for “a more complete code of conduct” for companies doing business in Bangladesh. He advises Western companies to slow down business volumes with Bangladesh to “a sensible level,” while they undertake a full assessment of the most serious issues. 

Bellace says the International Labor Organization can help set standards in Bangladesh’s garment industry, and employers could demand minimum standards and rigorous inspections. Labor unions have already helped regulate this “difficult-to-regulate industry.” She recalls the 1911 fire at Manhattan’s Triangle Shirtwaist Factory that killed 146 workers, mostly Jewish and Italian immigrant women. The outrage that followed led to a push for new legislation from the International Ladies Garment Workers’ Union.

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Why Social Networks Unwittingly Worsen Job Opportunities for Black Workers

Posted on May 10, 2013

Social-Media-Job-Referral-FeaturedAfrican Americans are getting the short end in employment opportunities due to their lack of access to networking groups dominated by whites, according to a New York Times article published this week.

The article notes that white Americans tend to get the edge in seeking certain jobs by accessing social networks that black Americans are not part of. Disturbing as this trend is, it stems from referrals that may seem innocuous to the people making them, say Wharton professors Janice Bellace and Katherine L. Milkman.

One stark fact: The U.S. civilian unemployment rate as of April 2013 is 6.7% among whites and 13.2% among blacks, according to the U.S. Department of Labor. Even as the economy improves, African American workers continue to be worse off than the country as a whole, writes Rutgers professor Nancy DiTomaso in the Times. She sees the culprit as favoritism with a strong racial component, arguing that whites are more likely to help other whites and that the social connections that could give someone an “in” to good, high-paying professional jobs are concentrated among whites. DiTomaso bases her findings on interviews she conducted with candidates for 1,463 jobs.

“Most Americans do not think of themselves as living in segregated communities, but they do,” says Bellace, a Wharton professor of legal studies and business ethics. She notes that much of this segregation resulted from zoning laws dating to the early 20th century that sought to keep suburbs free of the diverse mix of residences, commerce and people found in cities. “The result was diverse cities — in terms of race, ethnicity and household income — surrounded by white suburbs with income homogeneity,” she says. That housing pattern persists today, in part because public transportation in the suburbs is poor, she adds.

Bellace notes that similar forces have contributed to social networks that unwittingly worsen opportunities for black workers. Today’s college students know that the best way to land a coveted job is to obtain an unpaid internship, and the best route to doing that is to know someone. “White, upper middle class students are much more likely to be included in the social circles that will help them,” she says.

How Bias Hurts Businesses

Businesses hurt themselves with favoritism or discrimination in hiring, notes Milkman. When company leadership does not hire the best-qualified candidates because they fail to recruit minorities, they hurt themselves by not getting the best talent and fail to reach their “full potential,” she adds. “Teams that lack a diversity of perspectives also tend to be less creative,” she says, citing academic research on the subject.

Companies could overcome those problems in many ways, according to Milkman. Managers could be “more systematic about highlighting some of the uglier implications of what most employees view as a good deed — helping a friend make a connection.” She also calls for a “crackdown” on nepotism, which she describes as “an extreme form of the type of social networking that can harm minorities.”

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US Airways and American Airlines: On Board for a Merger?

Posted on August 6, 2012

US Airways in recent weeks has set an aggressive flight path for its plan to merge with bankrupt American Airlines. Indeed, US Airways CEO Doug Parker has stated that the merger is the only way to effectively compete against United and Delta, its two bigger rivals.

US Airways has taken a number of steps to help push American – which would just as soon emerge from bankruptcy as a standalone company – into a merger. For example, it has already secured tentative contract agreements with American’s three biggest unions — The Transport Workers’ Union, The Allied Pilots Association and The Association of Professional Flight Attendants. In addition, US Airways bought a sliver of American’s debt, which means it will be treated as a creditor in American’s bankruptcy hearings and be able to gain valuable information about the company’s operations.

We asked two Wharton professors – one an expert on strategy and the other on unions – for their analysis of this possible merger.

Emeritus management professor Lawrence G. Hrebiniak notes that “US Airways desperately wants the merger with American Airlines. A merger of numbers 3 and 4 would add size, scale economies and an ability to compete better with United and Delta.”

He points out that Philadelphia, a US Airways hub, is the largest metropolitan city in the country that does not operate flights to Asian markets, including China and Japan. “American has the flights and planes, so the merger would immediately add to US Airways’ presence in Asia,” he says, noting that US Airways has ordered airplanes that would allow flights to Asia, but “delivery is years away.”

The merger looks good for both airlines, suggests Hrebiniak, but not for consumers. Reduced capacity or fewer flights with the same or increased demand “will result in higher prices, fewer seats, longer lines and more disgruntled customers, the airline’s statements to the contrary notwithstanding…. Also, consumers should use their frequent flyer miles soon; I have a feeling they will disappear quickly after a merger.”

So, why is American’s management team hesitating to jump on US Airways’ offer? “Could it be due to the big bonuses they will receive if American successfully emerges from bankruptcy?” he asks.

According to Janice Bellace, professor of legal studies and business ethics, “a big problem that crops up in airline mergers is the difficulty realizing the expected gains from integrating the two airlines. The main reason for that is that the main occupational groupings — the pilots, the flight attendants, the mechanics, in other words, the people who can stop an airline from flying — are unionized. In this industry, seniority is extremely important because it affects the individual’s ability to have some control over route selection and scheduling. When there’s a merger of two airlines, the new airline has to integrate two lists of employees – pilots, for example — with different seniority rules.” There are other differences in the contracts for the two sets of employees, she notes, “but how seniority will be treated is often the huge stumbling block.”

Aware of how hard it is in an airline industry merger to reap cost savings, “analysts reacted very positively to US Airways’ April 20 announcement that it had reached an agreement with American Airlines’ three largest unions to support a AA-US Air merger,” she says, adding that unionized employees often resist a merger, but in this case, 55,000 of American’s 80,000 employees were supporting one.  

It’s also important to note, Bellace states, that the nine-member unsecured creditors’ committee of AMR (American’s parent company) “must approve the company’s restructuring plan and that American’s three largest unions each have a seat on that committee.” Why three unions agreed to support US Airways is “a more complex question. It could be to gain leverage in their negotiations with American, or to throw support to their preferred merger partner at a critical time.” 

In February, American announced it was seeking a 20% reduction in employee costs and 13,000 job cuts. As expected, Bellace says, “the specific proposals made by American to each of the three unions received a stony reception.” American on March 27 then asked the bankruptcy judge to let it void its existing collective agreements, which “put immense pressure on the three unions to engage in serious concession bargaining and to reach a new agreement that they could tolerate and that their membership would vote to approve.” The judge said he would issue a ruling June 27.

In such tough negotiations, Bellace adds, “it would not be surprising if the unions sought some leverage – and making an agreement to support a merger with US Airways certainly gave them that leverage. They were demonstrating to American Airlines that they had an alternative to caving in to American’s demands.” American then modified its bargaining demands, and negotiations on new collective agreements took place. “Right at the June 27 deadline, the bargaining committees of the three unions agreed to take American’s last, best offer to a vote. The [bankruptcy judge] has agreed to postpone his ruling until August 8, at which time the results of the balloting will be known.”

Each of the three unions had different issues, Bellace notes. “The contract with the 10,000 member Allied Pilots Association (APA) has received the most attention, in part because this is the most expensive employee group and also the one most critical to the future of American Airlines. The proposed agreement with the APA contains some major concessions, but it freezes the pilots’ pension plan instead of terminating it, gives a 14.8% pay increase over the six years of the agreement and has a no-furlough pledge.” Finally, if the agreement is approved, the pilots will get an equity stake of 13.5% in the company that emerges from bankruptcy.

Assuming the three unions vote to accept the new agreements, and assuming that the bankruptcy judge approves these agreements, “the question remains whether US Airways’ bid to merge with American will continue to merit serious attention from the unsecured creditors’ committee,” Bellace says. “The position taken by the three members from unions on that committee will likely decide the question. US Airways has not hammered out any specific agreement with any one of the three unions, so it is not known how the terms and conditions of employment of these employees in a merged airline would compare with those they will have under the new agreements.”

Hrebiniak adds that “US Airways’ longing for American is clearly suggested by its deals with American’s unions, which are taking a ‘less bad’ offer over a ‘much worse’ offer. American will surely lay off a bunch of people if it remains independent after emerging from bankruptcy. US Airlines has promised to hurt the unions less, thus gaining their support.”

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Facebook Passwords, Privacy and the Lack of Legal Protection

Posted on April 19, 2012

Reports that some employers are requiring job candidates to hand over their Facebook log on information have caused an outcry over perceived violations of personal privacy — and even calls for a federal investigation by some members of Congress.

But U.S. job seekers and the currently employed as well  should exercise caution, according to Wharton legal studies and business ethics professor Janice Bellace. She says in the U.S., anyone trying to challenge such a practice in court would have almost no legal ground to stand on. “People think they have more rights than they actually have; they seem to think they have rights that are just not there,” she says.

For example, she notes that employment law for decades has said that non-unionized workers could always be fired for taking actions that publicly disparage their employers. But 30 years ago, doing so was relatively complicated, and catching workers in the act was just as difficult. “When I was in law school, we used to read about cases where it did happen because it was so unusual,” Bellace recalls. “If you were talking to your friends about how much you hated your boss, you probably did it face-to-face. Although technically, under the law you might have gotten in trouble, nobody ever knew about it.”

But social media has been a game changer. “Technology has made it so much simpler for employees to get into trouble,” Bellace says. Years ago, an employee might have written a letter to a newspaper tearing apart an employer, “but it took time to sit down and type it out. Now you can Tweet it so simply. People say things before their mind stops them and says, ‘What am I doing?’”

The law is equally devoid of traction for potential employees who might be asked to provide access to their Facebook accounts, Bellace notes. “It has always been the case that employers could ask others about you for a reference and, if you refuse to give them names, they can refuse to hire you,” she says. “I’m not saying it’s right or wrong, but it’s the state of the law.”

So why are the current incidents causing such an uproar? “Employees think that their private life is protected by some right of privacy and that either a current or potential employer shouldn’t be able to invade their private lives.” But, legally, in the U.S. there is little guarantee of that, Bellace says.

“Parts of the Bill of Rights refer to the right of the citizen or person against the state,” she notes. “No state can come into your house and ask to read your diary or computer files without a search warrant. It doesn’t say anything about an employer.” Last week, Maryland legislators passed what is believed to be a first of its kind bill that prohibits employers from requiring job applicants to hand over access to private social media accounts. States including California, Michigan, Minnesota and Illinois are considering similar legislation. Bellace says that she knows of no previous state law that explicitly offers this right of privacy, nor any case law that would support an argument in court, “although we may begin to see that.”

She points out that circumstances are very different in other countries where statutes exist that recognize an individual’s right to privacy. In Germany, for example, laws date back to the post World War II era when officials there sought to ensure that people could not be fired from their jobs for aspects of their personal lives, as they had been under the Nazi regime. A few years ago, Bellace attended a conference in Australia and recalls that the organization later couldn’t get a list of attendees from the Australian firm it hired to plan the convention because the law in that country prohibits the sharing of data without permission from the individual.

“Some of these countries developed laws before social media took off,” she notes. “That adds an interesting wrinkle in those countries because they are building on a foundation of law that says you own your information.”

Bellace says even people in the U.S. who try to sue an employer – one who has asked for access to social media accounts — on the grounds of discriminatory hiring practices (because the accounts may contain information such as an applicant’s age or race) may have trouble making a case. The employer could argue that it is asking all job candidates to provide the access and thus applying the policy broadly, Bellace points out, and if that is the case, the job seeker would have to prove that the company violated the law after checking out the entire applicant pool, which could be harder to prove.

“How do you know why others didn’t get hired? How do you know why you didn’t get hired?” Bellace asks. “That’s why employment lawsuits are so hard to bring.”

She predicts that there will eventually be further changes in the law “because younger people used to interacting with others online through social media will be more disturbed by what they view as an unreasonable intrusion into their private lives and therefore may propose legislation.” But Bellace adds that it will be some time “before people completely coalesce around this notion that you have a right to a private life and privacy in online communications.”

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